Annuity 101-Learning Annuity 101 Basics
Part of annuity 101 is understanding that annuities are investment
vehicles that are sold primarily by insurance companies. Annuities play a
very important role in structured settlements, retirement planning, and
more. They enable you to save money and taxes while eliminating the fear
that you will outlive your savings. Basically, an annuity is an investment
contract or settlement policy that is between you and an insurance
company.
You should know when learning annuity 101, that every annuity has two
basic properties - whether the investment type is fixed or variable, and
whether the payout is immediate or deferred. An annuity with immediate
payout will begin payments to the recipient immediately, whereas the
deferred payout means that they will receive payments at a later date. An
annuity with a fixed investment type offers a guaranteed return on
investment by investing in government bonds and other low-risk securities.
Based on these two possibilities there are four possible combinations, but
the ones most commonly seen in practice are annuities with immediate
payout and fixed investments, and annuities with deferred payouts and
variable investments.
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